The United States' national debt is rapidly approaching $16.5 trillion. Our economy seems to be in a tailspin, and despite what the number-fudgers over at the Bureau of Labor Statistics say, real unemployment seems to be hovering over 14%. In short, the economy sucks, and there seems to be nothing that Congress or the Obama administration can do about it — no matter how much money they throw at the problem.
In their quest to stimulate aggregate demand, our government has racked up quite the debt. Because Congress spends more than they take in — over a trillion dollars in deficits each year — they need to borrow to make up for the difference. Unfortunately, we've now borrowed past our $16.4 trillion limit, and the decision rests on Congress' shoulders to either raise the debt ceiling, dig an even deeper hole, or cut spending so that we can stay beneath the ceiling.
President Obama, his Democrat followers in Congress, and some moderate congressional Republicans all want to raise the debt ceiling. The Tea Party congressional Republicans, however, are against more borrowing. For this, they've faced criticism from the Democrats. "If congressional Republicans refuse to pay America's bills on time, Social Security checks and veterans' benefits will be delayed," President Obama said. "We might not be able to pay our troops, or honor our contracts with small business owners."
This, of course, is a very specious argument. President Obama claims that House Republicans are preventing America from paying its bills, but the truth is that America has not paid its bills for a long time — that's exactly why we would be borrowing more money. Paying off your Visa bill with your MasterCard is not really paying your bills, it's only kicking the can further down the road, and making matters worse in the long-run.
In 2006, then-Senator Obama said the following before Congress, regarding this very same issue: "The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our government’s reckless fiscal policies." When the debt was only $8.6 trillion, Senator Obama was spot-on about the debt ceiling. Now that it's almost twice as large, and he'd have to bear the political fallout of budget cuts, President Obama has shamelessly flip-flopped in the wrong direction.
Talk about a real leadership failure.
The Tea Party, politically speaking, cannot afford to flip-flop this same way. They are by no means a perfect caucus, and they ought to remember what brought them in during the 2010 Republican tidal wave: an opposition to government growth, and fiscal responsibility. Digging a deeper hole for the American people is anything but fiscally responsible.
If the Tea Party abandons this practice and agrees to raise the debt ceiling again, they will lose credibility with their base, and with the swing libertarian voters they need to maintain the Republican majority.
As our debt load increases, the risk of a dollar crisis increases with it. Eventually, all debts must be paid back. If we let our national debt rise too high, interest rates will have to rise with it ... or no one will be interested in buying or holding our debt. If interest rates spike, we may be unable to pay the interest payments on the debt, let alone the debt itself. Our options at that point would be to monetize the debt by printing money (resulting in massive inflation), or to default on the debt (resulting in a currency crisis). Both would be disastrous for every American's standard of living.
Defaulting on our current debt, however, is not a particularly palatable option either. The Tea Party should not completely rule out a small raise of the debt ceiling, but only if it it comes with real, substantial budget cuts which will eliminate the deficit before it becomes necessary to raise the debt ceiling again. They must make it clear that the price of Tea Party cooperation is more than mealy-mouthed half-pledges to one day pay our bills: it must be an honest commitment (in the law) to balance the budget and begin to pay down our debt, so that America can one day actually pay its bills.